All 36 members of the Life Offices’ Association (LOA) are now required either to add an AIDS (Acquired Immune Deficiency Syndrome) exclusion clause to their life policies, or to test potential policyholders for the virus where they require “large” amounts of cover.The LOA agreement on this matter stipulates that the option applies if life cover of R200 000 or more is required by a client. Similarly, if income payable as a result of disability is R2 000 per month or more the option also applies.However, life companies have the right to adopt the agreement in line with their particular underwriting styles. Assurers are not prevented from incorporating both the exclusion clause and the human immunodeficiency virus (HIV) antibody test, or even of applying stricter measures if deemed necessary.In many cases an AIDS victim dies from the medical complications arising from the infection. The LOA agreement states, therefore, that the exclusion clause applies if “in the opinion of the insurer, any death, illness, disorder, disability or inability to carry out a remunerative occupation, is in any way due to or arising directly or indirectly, entirely or partially from AIDS.”In other words, the policy is invalidated when death or disability is caused by AIDS. The only proceeds received by the insured are likely to be the surrender value or a refund of eight times the initial year’s premiums, whichever is the greater. There is still some uncertainty over this issue, however.The clause does not apply if AIDS is acquired through any of the following:• the transfusion of blood or blood products:• the execution of medical duties by lives assured who are registered with the SA Medical and Dental or Nursing Councils; and/or,• the assistance of an infected casualty by members of the police force, fire service or defence force or any recognised medical auxiliary body.In all of the above cases, the benefits of a life policy are paid out in full.Says Jurie Wessels, PRO for the LOA, “Should a person undergo a test and prove negative, the AIDS exclusion need not apply. Should the assured acquire the disease after inception of his life cover, he will still be paid the full benefits of the policy.”It is possible for a potential life assured to undergo an AIDS test (HIV antibody test) not more than three months before taking on a policy. If the test is negative full life cover is provided. The agreement appears to be a definite move on the part of assurers to exclude the threat of AIDS almost entirely from their business.It reduces the chance of individuals finding they are HIV positive and then going to buy huge life policies, knowing they are bound to die ahead of schedule (so-called anti-selection).With the projected increase in the incidence of the disease, such occurrences would impact dramatically on assurers’ financial positions if such claims were entertained.The exclusion clause applies to individual mortality, morbidity and dread disease risks than the following: pure endowment policies; retirement annuities without life cover; children’s policies; and, policies with life cover of eight times initial annual premium or less.When a claim is made, a confidential medical report from the assured’s doctor is usually requested.This must state whether the doctor believes the claim is a result of AIDS, and whether he has ever tested the assured for HIV antibodies. Although the agreement was to come into effect on November 1 1988, some assurers, such as Sanlam, introduced AIDS measures earlier in the year.All of Sanlam’s potential clients will be subject to the exclusion clause and only those requiring life cover over R200 000 will have the option of a test or the exclusion clause. Other assurers, according to Mr Wessels, will implement the agreement as soon as is practicable. Many will have to update their computer systems to handle the new clauses.There have been various reactions from assurers on how to adopt the AIDS agreement. Crusader Life, for example, has introduced an AIDS test for all new policies where life cover exceeds R200 000.Says Cohn van der Meulen, joint MD of Crusader Life, “We believe in the principle that cover should be available to as many people as possible provided adequate precautions are taken at the underwriting stage. So if an assured develops AIDS after his life policy commences, he will still receive the benefits of his policy.“Certain products marketed via direct response methods or on an immediate issue basis have automatic AIDS exclusions due to practical difficulties and possible anti-selection.”IGI Life has adopted the LOA recommendation, but has included a stricter exclusion clause for disability to the effect that benefits are not paid out if AIDS is the cause.Southern Life, on the other hand, is testing all policy applicants who require life cover over R200 000. Other than this, there is no AIDS exclusion clause for life assureds.Gerald Raftopoulos, AGM life technical services at Lifegro, says his company is following the LOA agreement “to the letter”. For death benefits under R200 000, Lifegro merely asks an AIDS-related question in the application form. For cover between R200 000 and R600 000, the applicant has the choice of an HIV test or an exclusion clause.Mr Raftopoulos says he recommends the test because of the security of cover that follows if it is negative. “At least then the assured is covered. Should he later develop AIDS he will receive the benefits.”For life cover over R600 000 an applicant is obliged to take an HIV test, but there is no exclusion clause on such a policy.Old Mutual is offering the option of an exclusion or an AIDS test for life cover over R150 000. Chief actuary for Old Mutual, Theo Hartwig, says, however, that the exclusion is offered first with the test as a second option.Most of the assurers have tightened up on confidentiality. They offer an applicant the choice of being tested for AIDS by a doctor other than the family doctor. They will also ensure results of the tests remain completely confidential.